Should we pay off our Help to Buy (H2B) Loan as soon as we can?

silvercar

SandyShores said:

Update, we waited until the end of the interest free period to pay off the H2B.  The new valuation at that point meant another £9k was added to our repayment figure for the H2B loan. Seems like a lot, but not as high as I expected.

Was it worth it?  We didn't pay interest on that £65k and the MSE calculator says we would have paid £5994 in interest for the five years.  So effectively that brought the difference down to just over £3k (compared to including it in the mortgage rate of 1.84%).  

We would also have had a slightly higher interest rate on the whole £309k if we'd just had our 5% deposit so potentially very little difference overall.  I also don't think we would have been able to get a big enough mortgage without H2B, and of course the payments would have been higher.  We only had about £5k to spend after moving and that included getting a patio laid, some plants, curtains, new furniture etc. so money was tight.

Luckily both our salaries increased and were able to make quite a few OPs.  So, even adding in the H2B, our re-mortgage was for a much smaller amount than we originally borrowed.  

Of course it would have been great to pay off the whole mortgage while the rates were so low, but we've fixed again (at around double our 2020 rate) and planning to make as many OPs as we can.  So all in all it was definitely worth doing.

I think your low deposit was the key in all this. The HTB scheme enabled you to buy when otherwise you would have struggled to get a mortgage or paid a higher interest rate penalty for 95% mortgage.

The downside is that you were forced to look at new builds, in order to use the HTB scheme, which are notorious for being overpriced and risk falling in value in the first couple of years. 

SandyShores

silvercar said:

I think your low deposit was the key in all this. The HTB scheme enabled you to buy when otherwise you would have struggled to get a mortgage or paid a higher interest rate penalty for 95% mortgage.

The downside is that you were forced to look at new builds, in order to use the HTB scheme, which are notorious for being overpriced and risk falling in value in the first couple of years. 

That's a really good summary silvercar.  We also bought off plan, which I didn't realise was such a risk.  But by pure luck we have a house we love, with a garden that isn't overlooked.